2016 FEMA Flood Changes

Learn about New Rates and Other Changes Affecting Your Clients Starting in April Beginning April 1, 2016, the National Flood Insurance Program (NFIP) will begin implementing additional flood insurance program changes resulting from reform legislation. These changes may significantly affect what your clients pay for their flood insurance. While some property owners may see minimal policy cost increases, others will experience larger premium increases—for example, clients with buildings in high-risk areas built before that community’s first Flood Insurance Rate Map (pre-FIRM). Be sure to tell your clients about these increases and other changes before they go into effect. A summary of all of the changes is below, but you can find more details in the recent April 1, 2016, Program Changes NFIP Bulletin. Premium Increases Overall, average premiums will increase by 9 percent. On April 1, 25 percent annual increase for pre-FIRM business properties begins. Rate Increases for Buildings Newly Mapped into High-Risk Zones Buildings newly mapped into a high-risk Special Flood Hazard Area (SFHA) will receive premium rate increases using a FEMA multiplier that will change every January 1 (beginning January 2017) based on the year the new map became effective. You will need to be aware of which multiplier to use when writing your client’s policy to ensure that you apply the correct increase. Certain Lapsed Policies Now Rewritten at Full-Risk Rates (with two exceptions) Lapsed policies on pre-FIRM subsidized-rated buildings or policies rated using the Newly Mapped procedure will be rewritten using full-risk rates if coverage has lapsed more than 90 days or lapsed twice, regardless of the number of days, unless: The lender no longer required the insured to obtain and maintain flood insurance at the time of lapse or cancellation; OR The insured was in a community that was suspended from the NFIP, and the coverage was purchased within 180 days of the community‘s reinstatement. This change also applies to policies written after April 1, 2016, on policies that lapsed prior to this date. FEMA will also count as a lapse coverage that was switched from a NFIP policy to a non-NFIP policy. Change in Reformation of Coverage Procedure Starting April 1, 2016, how a policy is re-rated changes if a rating error is discovered: If a rating error discovered at claim time is found to be due to an incorrect Base Flood Elevation (BFE) or flood zone and an additional premium is needed, the policy only has to be re-rated going forward (called prospective reformation). If any other rating error is discovered at claim time, only the current term needs to be re-rated. If any other rating error is discovered—other than at claim time—only the current term needs to be re-rated, unless the discovery occurs within 60 days of renewal; in that case, the correction will be made effective at the next policy renewal. Communicating Flood Risk Determinations In response to recent reform legislation requiring FEMA to clearly communicate flood risk determinations to policyholders, WYOs and the NFIP Direct Servicing Agent will re-underwrite all policies receiving pre-FIRM subsidized premium rates, standard X-zone-rated, Preferred Risk Policies, and policies rated using the Newly Mapped procedure, so that FEMA can begin providing additional information to renewing policyholders regarding their flood risk, starting with October 2016 renewals. Agents should be aware they may be asked to help. FEMA will also provide this information to new policies starting April 1, 2016. Be sure to visit Agents.FloodSmart.gov. to access tools and resources that help you protect your customers and build your business.

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